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The numbers are clear: private auto insurance is less expensive

Mark Milke: The only way to claim public insurance is cheaper than private insurance is to ignore what people actually pay elsewhere. For almost 50 years, that’s exactly what has happened.
A dated model.

If you must drive an automobile in British Columbia—for work, to take the kids to soccer, to drive your mom to the doctor, whatever the reason—you already know your insurance premiums are sky-high.

This year, British Columbia has the highest average auto insurance premiums in Canada, soaring past even Ontario, which used to be the nosebleed leader for auto insurance costs. As of now, the average auto insurance premium is $1,505 in Ontario, and $1,832 in British Columbia.

The average figures include basic (mandatory) insurance plus optional coverage. The calculations result from actual premiums paid and care of the General Insurance Statistical Agency (GISA), the agency run by provincial insurance regulators which tracks the statistics.

The British Columbia eclipse of Ontario is noteworthy, but for me, the more interesting comparison has always been with Alberta. B.C. is my born-and-raised province and I’ve moved back and forth between the two provinces over my career. I am familiar with the automobile insurance systems in both provinces, and since the early 2000s have analyzed the premiums in multiple reports and columns.

Here’s the thing: From the year 2000 forward, automobile insurance was more expensive in B.C., with one exception: In 2003, Alberta’s average automobile premiums were $2 higher than those in British Columbia ($1,141 compared with $1,139 respectively).

Two bucks. That was it. In one year. But in every year before and after, average premiums in British Columbia were always higher than Alberta.

"From the year 2000 on, automobile insurance was more expensive in B.C."

And now, in 2019, the average British Columbia auto insurance premium at $1,832 is a whopping 39% higher than the average $1,316 Alberta premium.

Over the years, British Columbians were told the opposite. Politicians and ICBC spokesman used to regularly claim that “public” insurance was cheaper.

The politicians and ICBC based this on multiple flawed studies from the Consumers Association of Canada (CAC), an organization that didn’t appear to have any real members and thus didn’t really represent consumers.

The CAC received million of dollars in grants from the federal government over the years, including for badly flawed studies released in the early 2000s. The group may also have received funding from government employees’ unions involved in government insurance in B.C., Saskatchewan, and Manitoba.

It all served to promote the myth that non-competitive government-owned insurance was cheaper than when companies duke it out for consumers’ business.

The funding sources didn’t make the CAC statistics in error. Where the group erred was when they ignored actual paid premiums across the provinces (the averages quoted above) in favour of average and median measurements based on web quotations.

The obvious problem: in private sector provinces, you can find a quote much higher than what any sane consumer might pay.

In Alberta, my automobile insurance is just over $1,200. I could easily find a quote double that. But adding $2,400 to $1,200 and coming up with an “average” Alberta insurance premium of $1,800 would be misleading. I don’t pay $1,800. I pay $1,200.

"The obvious problem: in private sector provinces, you can find a quote much higher than what any sane consumer might pay."

The only premium that matters is the one you pay; the only average that matters is the average of premiums actually paid.

The mistake would be half-forgivable if data on actual paid premiums never existed – but it did. Since the early 2000s, I’ve used the averages that result from actual paid premiums country-wide to point out where cheaper insurance exists: Alberta, not British Columbia.

Still, one might try to use Manitoba and Saskatchewan as proof that government-run automobile insurance companies are a better deal. In 2019, average premiums in those provinces are now $1,085 and $1,235 respectively. Except that Prince Edward Island ($816), New Brunswick ($867), Nova Scotia ($891) are all cheaper than Saskatchewan and Manitoba. Newfoundland and Labrador’s average auto insurance premium is $1,168, midway between the two Prairie provinces with government insurance companies.

And here’s the thing: the Atlantic provinces are all competitive private sector marketplaces for automobile insurance.

For the record, dissimulation about auto insurance in British Columbia has been going on for five decades. ICBC’s origin can be traced back to 1972. During the election campaign, the opposition NDP ran advertisements that compared self-insured government vehicles with private sector rates: “The government insures its vehicles for $25 a year, why can’t they [insure] yours?”, asked the NDP, claiming private sector rates were higher in B.C. than in the rest of the country (but without proof).

As I touched on in a past Orca column in June. Back in 1972, the NDP opposition (which became government that year and created ICBC), omitted a few key facts in its claim. That was the one used to justify banning private sector competition in British Columbia: The “$25 a year” claim did not include repair costs to government-owned vehicles that would normally boost insurance rates.

Also, British Columbians hit by a government vehicle were prevented, by law, from suing the government for injuries or vehicle damage. They were forced accept the government-offered amount.

B.C.’s consumers have been getting hit by fake claims about automobile insurance ever since. Ending that charade is long overdue. Getting to actual insurance reform starts with actual hard numbers, not the fake ones offered up for 50 years.

Mark Milke an independent public policy analyst. His newest book, The Victim Cult: How the culture of blame hurts everyone and wrecks civilizations, will be released in October. He is also author of Political Risk: The case of ending ICBC’s insurance monopoly, from the Canadian Taxpayers Federation.